Wilmington Savings Fund Soc'y, FSB v. Hutchins

WILMINGTON SAVINGS FUND SOCIETY, FSB, D/B/A CHRISTIANA TRUST AS OWNER TRUSTEE OF THE RESIDENTIAL CREDIT OPPORTUNITIES TRUST III, Plaintiff, v. GREGORY HUTCHINS, in his individual capacity and as personal representative of the Estate of SANDRA J. NEILL, and THE UNKNOWN HEIRS, DEVISEES, OR LEGATEES OF SANDRA J. NEILL, Defendants.

CV 18-0346 JCH/JHR

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO

December 20, 2019

MEMORANDUM OPINION AND ORDER

This matter comes before the Court on the Proposed Findings and Recommended Disposition ("PFRD") issued by Magistrate Judge Ritter on October 18, 2019, [Doc. 58], and on Defendant Gregory Hutchins' Objections to the PFRD, filed November 1, 2019. [Doc. 59]. In the PFRD, Magistrate Judge Ritter recommended that Hutchins' Motion to Dismiss [Doc. 34], filed March 28, 2019, be denied. Hutchins objects to Magistrate Judge Ritter's PFRD on the grounds that "the findings and conclusions are unsupported both in fact and law." [Doc. 59, p. 1]. Specifically, Hutchins objects to: (1) Magistrate Judge Ritter's conclusion that Plaintiff Wilmington Savings Fund Society, FSB, D/B/A Christiana Trust as Owner Trustee of the Residential Credit Opportunities Trust, III ("Wilmington Savings") has established its legal existence by a preponderance of the evidence; (2) his factual finding that Wilmington Savings has a legal existence sufficient to support the Court's exercise of diversity jurisdiction; and, (3) his conclusion that Wilmington Savings has sufficiently alleged its standing under Article III of the Constitution so as to establish this Court's subject matter jurisdiction. [See id., p. 2]. Having reviewed these objections de novo, the Court determines they must be overruled. Therefore, the PFRD is adopted and Hutchins' Motion to Dismiss is denied.

I. STANDARD OF REVIEW

When resolving objections to a magistrate judge's proposed findings and recommended disposition, "the district judge must determine de novo any part of the magistrate judge's disposition that has been properly objected to. The district judge may accept, reject, or modify the recommended disposition; receive further evidence; or return the matter to the magistrate judge with instructions." Fed. R. Civ. P 72(b)(3); see also 28 U.S.C. § 636(b)(1)(C) (2012). The Tenth Circuit requires a "district court to consider relevant evidence of record and not merely review the magistrate judge's recommendation," when conducting a de novo review of a party's timely, specific objections to the magistrate judge's report. In re Griego, 64 F.3d 580, 583-84 (10th Cir. 1995). A district court need not, however, "make any specific findings; the district court must merely conduct a de novo review of the record." Garcia v. City of Albuquerque, 232 F.3d 760, 766 (10th Cir. 2000).

II. FACTS

Plaintiff, "Wilmington Savings Fund Society, FSB, d/b/a, Christiana Trust as Owner Trustee of the Residential Credit Opportunities Trust III," [Doc. 1, p. 1], filed its Complaint for In Rem Foreclosure against Sandra J. Neill on April 13, 2018. [Doc. 1]. Due to her alleged default, Wilmington Savings sought to foreclose on Neill's mortgage on the property known as 929 Purple Aster Dr., Bernalillo, New Mexico. [See Doc. 1-3]. This in rem proceeding is in addition to an in personam action Wilmington Savings filed against Neill in state court on September 18, 2014. See No. D-1329-CV-2014-01346. On June 13, 2018, Ms. Neill filed a Notice of Filing of Petition of Bankruptcy, which stayed these and the related state proceedings. [See Doc. 9]. On September 20,2018, Wilmington Savings filed a Notice Regarding Closing of Bankruptcy and Discharge. [See Doc. 10].

On September 21, 2018, Hutchins, claiming to be the executor of Neill's estate, filed a Suggestion of Death on the record. [See Doc. 12]. Thereafter, this Court granted Wilmington Savings' Motion to Amend its Complaint to substitute Hutchins as well as any unknown heirs who may claim an interest in the subject property as Defendants. [See Docs. 13, 28]. Wilmington Savings filed its Amended Complaint on March 1, 2019, naming Hutchins in his individual capacity and as personal representative of the estate of Ms. Neill, as well as her unknown heirs, devisees or legatees. [Doc. 30]. Rather than submit an Answer, on March 28, 2019, Hutchins filed his Motion to Dismiss. [Doc. 34]. After briefing was complete this Court referred the case to Magistrate Judge Ritter, who issued his PFRD recommending that Hutchins' Motion be denied.

As recited in the PFRD, Magistrate Judge Ritter viewed Hutchins' Motion as a factual attack on the subject matter jurisdiction of this Court, and he appropriately considered the parties' submissions outside of the four corners of the Complaint without converting the motion to one seeking summary judgment. [Doc. 58, p. 9]. After reviewing an affidavit submitted by Hutchins and comparing its assertions against evidence proffered by Wilmington Savings, Magistrate Judge Ritter determined that Wilmington Savings proved that it is a valid Delaware corporation and statutory trust by a preponderance of the evidence. [See id. (citing Docs. 35-1, 35-2)]. Therefore, Magistrate Judge Ritter concluded that Wilmington Savings proved its legal existence and capacity to bring suit. [Id., p. 10]. Relying on these findings, Magistrate Judge Ritter then concluded that the requirements of diversity jurisdiction were met. [Id., p. 10]. Finally, Magistrate Judge Ritter concluded that Wilmington Savings adequately pled its standing to foreclose on the subjectmortgage under Article III and New Mexico's Uniform Commercial Code ("UCC"). [Id., pp. 10-11].

In his Objections, Hutchins goes to great lengths to highlight how Wilmington Savings defined itself in its Amended Complaint. [See Doc. 59, pp. 2-3]. Hutchins claims that his affidavit proves that Wilmington Savings, as defined in the Amended Complaint, does not exist, and therefore "cannot invoke this Court's jurisdiction." [See id., p. 4 (defining the "central threshold legal issue in this case" as "[h]as Plaintiff as defined and admitted in the amended complaint ... proven by a preponderance of evidence its legal existence sufficient to establish diversity jurisdiction.")]. Hutchins argues that Wilmington Savings "placed no evidence into the record that would establish by a preponderance of evidence [its] legal existence[.]" [Id., p. 7].

Hutchins admits that Wilmington Savings proffered a trust document and Delaware Secretary of State record in support of its Response to his Motion, [id.], yet he would invalidate their effect. [Id., p. 12 ("The record is devoid of any proof that Plaintiff is a legal entity.")]. Hutchins argues that Wilmington Savings simply "does not possess a cause of action" as "the record is devoid of any admissible evidence that Plaintiff, as defined and admitted in paragraph 1 of the complaint, is a legal entity." [Id., p.13]. He also posits that Magistrate Judge Ritter's conclusion that he failed to rebut Wilmington Savings' evidence equates to an improper finding of waiver. [Id., pp. 8-11].

In a second and distinct attack, Hutchins objects to the PRFD's conclusion that Wilmington Savings has satisfied the requirements of Article III for standing as a foreclosure plaintiff. [See id., p. 13-15]. Specifically, Hutchins contends "that Plaintiff has not factually alleged ... that due to any ownership in the debt, that it has suffered a direct and personal injury." [Id., p. 16]. Hutchins believes that Wilmington Savings is not the proper party to enforce the note at issue because thestate court never made "a determination ... that Plaintiff had standing to enforce the note." [Id., p. 17]. He adds that "[i]ntervening events have mooted the issue of Plaintiff's right to enforce the note." [Id.]. Specifically, Hutchins contends that "the bankruptcy and death of S.J. Neill has rendered all of these issues moot ... by operation of law" because Ms. Neill's in personam liability on the note was discharged by the Bankruptcy Court. [Id., p. 18].

III. APPLICABLE LEGAL STANDARDS

A motion brought under Rule 12(b)(1) attacks the subject matter jurisdiction of the district court. Fed. R. Civ. P. 12(b)(1). Rule 12(b)(1) motions to dismiss for lack of subject matter jurisdiction take two forms: (1) facial attacks on the complaint's allegations; or, (2) factual attacks on the underlying facts on which subject matter jurisdiction depends. See Holt v. United States, 46 F.3d 1000, 1002 (10th Cir. 1995); see also Ruiz v. McDonnell, 299 F.3d 1173, 1180 (10th Cir. 2002).

When reviewing a factual attack on subject matter jurisdiction, a district court may not presume the truthfulness of the complaint's factual allegations.... [Rather, a] court has wide discretion to allow affidavits, other documents, and a limited evidentiary hearing to resolve disputed jurisdictional facts under Rule 12(b)(1).... In such instances, a court's reference to evidence outside the pleadings does not convert the motion to a Rule 56 motion.

Holt, 46 F.3d at 1002 (citations omitted).

A federal court will have subject matter jurisdiction based on diversity of citizenship of the parties where: (i) there is complete diversity among the parties; and (ii) that "the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs." 28 U.S.C. § 1332(a)(1) (2018). For complete diversity, "the citizenship of all defendants must be different from the citizenship of all plaintiffs." McPhail v. Deere & Co., 529 F.3d 947, 951 (10th Cir. 2008). In this context, "a corporation is a citizen of its state of incorporation and the state where its principal place of business is located." Grynberg v. Kinder Morgan Energy Partners, L.P., 805 F.3d 901,905 (10th Cir. 2015) (citing 28 U.S.C. § 1332(c)(1) (2012); Hertz Corp. v. Friend, 559 U.S. 77, 85 (2010)).

Article III of the United States Constitution further limits the jurisdiction of federal courts to "[c]ases" and "[c]ontrove...